MBS MID-DAY: 3/12/2012


(Reuters) – Euro zone finance ministers will sign off on a second bailout for Greece on Monday and shift their focus to Spain, whose government looks set to violate newly agreed EU budget rules by missing its deficit target again this year.

Greece, the bloc’s original problem debtor, swapped its privately held bonds at the weekend for new, longer maturity paper with less than half the nominal value, slashing more than 100 billion euros ($130 billion) from its debt.

The swap paves the way for euro zone ministers to give the final go-ahead to a 130-billion-euro package to finance Athens until 2014, after they decided on Friday that Greece – its economy shrunk by repeated austerity measures – had met all their conditions.

But as Greece’s financial problems have lost some urgency, Spain has raised a new challenge. After announcing the previous government had missed its 2011 budget deficit target by a significant margin, the new administration added it would not meet the EU-agreed deficit goal for this year either.

“Spain will be subject to serious discussion today, both because of the method and the substance of their announcement,” said one euro zone official involved in preparing for the ministers’ discussions.

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